What kind of relationship exists between the quantity of money demanded and the interest rate?

Question 1 options:

a constant relationship

a fixed relationship

an inverse relationship

a positive relationship

Question 2(1 point)

Saved

Suppose the Bank of Canada makes an open market sale and increases the bank rate. What will be the effect on the money supply?

Question 2 options:

It will have an indeterminate effect on the money supply

It will leave the money supply unchanged

It will increase the money supply

It will decrease the money supply

Question 3(1 point)

Which of the following is a function of the Bank of Canada?

Question 3 options:

increasing or reducing government spending

overseeing the national payments system

paying down the national debt

raising or lowering taxes

Question 4(1 point)

When the Bank of Canada purchases government securities from a chartered bank, what is the impact on that bank?

Question 4 options:

It automatically becomes poorer

It loses equity.

It receives reserves that can be used to make additional loans

It loses its ability to make loans

Question 5(1 point)

If the demand for money increases, what will happen to interest rates and the quantity of money?

Question 5 options:

Interest rates will decrease, and the quantity of money will stay the same

Interest rates will increase, and the quantity of money will increase

Interest rates will decrease, and the quantity of money will decrease

Interest rates will increase, and the quantity of money will stay the same

Question 6(1 point)

Scenario 11-2

A bank's assets consist of $1 000 000 in total reserves, $2 100 000 in loans, and a building worth $1 200 000. Its liabilities and capital consist of $3 000 000 in demand deposits and $1 300 000 in capital.

Refer to Scenario 11-2. If the bank desires to keep reserves equal to one-third of deposits, what is the level of the bank's excess reserves and how much money could the excess reserves be used to create in the banking system as a result?

Question 6 options:

Excess reserves are $300 000 and could be used to create $900 000 in the banking system

Excess reserves are $300 000 and could be used to create $300 000 in the banking system

Excess reserves are zero and could NOT be used to create any money in the banking system

Excess reserves are $700 000 and could be used to create $2 100 000 in the banking system.

Question 7(1 point)

If the rate of inflation in Canada falls relative to the rate of inflation in foreign nations, what will happen to the amount of Canadian net exports and subsequently the exchange rate for the Canadian dollar?

Question 7 options:

It will increase net exports, which in turn will increase the value of the dollar.

It will decrease net exports, which in turn will increase the value of the dollar

It will decrease net exports, which in turn will decrease the value of the dollar.

It will increase net exports, which in turn will decrease the value of the dollar

Question 8(1 point)

In a bid to get re-elected, politicians decide to decrease taxes when there is an inflationary gap. As a result, what action might the Bank of Canada decide to take?

Question 8 options:

reduce the bank rate

sell government securities to the chartered banks

increase the money supply

buy government securities from the general public

Question 9(1 point)

Suppose Scotland could produce 4 tonnes of potatoes or 2 tonnes of wheat per worker per year, while Ireland could produce 2 tonnes of potatoes or 3 tonnes of wheat per worker per year. What country has the comparative advantage and absolute advantage in producing potatoes?

Question 9 options:

Scotland has both the comparative and absolute advantage in potato production

Ireland has the comparative advantage in potato production, while Scotland has the absolute advantage

Scotland has the comparative advantage in potato production, while Ireland has the absolute advantage

Ireland has both the comparative and absolute advantage in potato production

Question 10(1 point)

Which of the following is NOT a function of the Bank of Canada?

Question 10 options:

controlling inflation

setting monetary policy

setting tax rates

being a lender of last resort

Question 11(1 point)

Which of the following is the best example of a tariff?

Question 11 options:

a $100-per-car fee imposed on all SUVs imported from South Korea

a tax placed on all SUVs sold in the domestic market

a subsidy from the Canadian government to domestic manufacturers of SUVs so they can compete more effectively with foreign producers of SUVs

a limit imposed on the number of SUVs that can be imported from a Japan

Question 12(1 point)

What is the term for exchange rates determined by the laws of supply and demand?

Question 12 options:

equilibrium exchange rates

fixed exchange rates

flexible exchange rates

dirty exchange rates

Question 13(1 point)

If the exchange rate between euros and dollars is 2 euros per dollar, when a Canadian purchases a good valued at 40 euros, what is its cost in dollars?

Question 13 options:

$40

$600

$20

$80

Question 14(1 point)

Other things being equal, if you took money out of your savings deposit account and put it in a demand deposit account, what would be the effect on the money supply?

Question 14 options:

M2+ would increase

M2+ would NOT change.

M2+ would decrease.

M2 would decrease

Question 15(1 point)

Which of the following statements about paper money in Canada is most accurate?

Question 15 options:

It is partially backed by gold and silver at the Bank of Canada

It is equal to M1

It is convertible into gold or silver at the holder's request

It is fiat money

Question 16(1 point)

Under a flexible exchange rate system, what will a contractionary fiscal policy lead to?

Question 16 options:

a depreciation of the domestic currency

a decrease in foreign reserves

an appreciation of the domestic currency

an increase in foreign reserves

Question 17(1 point)

Rebecca is Canadian and has family in Scotland. When her family sends a monetary gift for her birthday, how is this gift classified?

Question 17 options:

as net secondary income

as service imports

as merchandise imports

as net primary income

Question 18(1 point)

If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment, which of the following would be most appropriate?

Question 18 options:

a larger budget deficit and the purchase of securities in the open market by the Bank of Canada

a government surplus and the sale of securities in the open market by the Bank of Canada

a larger government surplus and a reduction in the bank rate

a larger government deficit and an increase in the bank rate

Question 19(1 point)

Which of the following statements about the velocity of money is the most accurate?

Question 19 options:

It is the rate at which the Consumer Price Index rises.

It is the average number of times that a dollar is used in purchasing goods and services.

It is inversely related to the rate of interest.

It is established by the Bank of Canada and, if needed, is adjusted four times a year.

Question 20(1 point)

What does the P in the equation of exchange represent?

Question 20 options:

average level of prices of final goods and services in the economy

profit earned in the economy

marginal level of prices

marginal propensity to spend

Question 21(1 point)

Which of the following best describes the role of the Bank of Canada as the lender of last resort?

Question 21 options:

It lends money to developing nations whose own central banks have failed

It keeps the money supply from drying up during economic panics

It provides mortgage money to people living in poverty

It lends money to people in localities NOT served by chartered banks

Question 22(1 point)

Suppose Edland can produce either 30 units of good A or 30 units of good Z, and Georgeland can produce either 150 units of good A or 200 units of good Z. For them both to benefit from trade, how much will each unit of Z exchange for?

Question 22 options:

between 0.75 of a unit and 1 unit of A

between 0.1 of a unit and 0.75 of a unit of A

more than 1 unit of A

0 units of A since only if the good Z is free will there be mutual benefit

Question 23(1 point)

A bank has demand deposits of $100 million, and it desires a 25 percent reserve ratio. How much will it hold in reserve?

Question 23 options:

$50 million

$100 million

$75 million

$25 million

Question 24(1 point)

Which of the following is NOT a reason that gold and silver have been historically used as money?

Question 24 options:

The issuer's name can be printed on gold and silver, but not on other commodities

They are scarce and valuable

They can easily be made into different shapes and weights

They can last a very long time

Question 25(1 point)

Which of the following is NOT a function of the Bank of Canada?

Question 25 options:

being a lender of last resort

setting currency-exchange rates

issuing currency

serving as a bank for the federal government

Question 26(1 point)

Which of the following is recorded as a credit in the Canadian balance of payments accounts?

Question 26 options:

European travel expenditures of a Canadian postsecondary student

the purchase of a Government of Canada bond by a British investment company

the purchase of a British soccer team by a Canadian investor

the importing of toys from a Mexican company

Question 27(1 point)

What does the money demand curve illustrate?

Question 27 options:

the various amounts of money that individuals will spend at different levels of GDP

the various amounts of money that individuals will hold at different price levels

the quantity of bonds that the Bank of Canada will buy at different price levels

the various amounts of money that individuals will hold at different interest rates

Question 28(1 point)

During the 2008-09 recession, the Canadian banking system was relatively unharmed compared with other developed countries. According to economists, what relative amounts of Canada's leverage ratios and capital reserves led to this result?

Question 28 options:

Canada had lower leverage ratios and higher capital reserves

Canada had higher leverage ratios and higher capital reserves

Canada had higher leverage ratios and lower capital reserves.

Canada had lower leverage ratios and lower capital reserves.

Question 29(1 point)

Which of the following would be classified in the capital account?

Question 29 options:

the purchase of Swiss francs by the Bank of Canada

the sale of Belizean sugar cane to a Canadian food company

the purchase of a British soccer team merchandise by a Canadian sports company

the importing of Jamaican rum

Question 30(1 point)

When is an expansionary monetary policy likely to increase real output more than just temporarily?

Question 30 options:

at virtually any output level

when actual output is beyond the economy's long-run capacity

when the economy operates at less than capacity

when the economy is at full employment

Question 31(1 point)

Which one of the following would be the most appropriate stabilization policy if the economy is operating beyond its long-run potential capacity?

Question 31 options:

an increase in the bank rate

an increase in government purchases, holding taxes constant

a reduction in taxes, holding government purchases constant

a purchase of bonds by the Bank of Canada

Question 32(1 point)

Scenario 14-3

Rebecca can produce either 20 tonnes of apples or 10 tonnes of grapes in a year, while Henry can produce either 10 tonnes of apples or 20 tonnes of grapes.

Refer to Scenario 14-3. What exchange rate results in mutually beneficial trade between Rebecca and Henry?

Question 32 options:

1 tonne of grapes to 1.5 tonnes of apples

1 tonne of grapes to 0.5 tonnes of apples

1 tonne of apples to 2 tonnes of grapes

1 tonne of grapes to 2 tonnes of apples